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Employer premiums to unemployment fund will increase

By {screen_name}
Wednesday, December 1, 2010

The premium that employers pay into the state’s unemployment fund will increase for many companies next year in an attempt to shore up Colorado’s Unemployment Insurance Trust Fund. The fund has been broke since January.

The rate increase will vary by employer and is based on the length of time a company has been open and the unemployment fund balance. The average base rate is 1.7 percent paid on the first $10,000 of every employee’s salary in the company, but it can vary from 0.1 percent to 5.4 percent. A surcharge of 0.22 percent and a solvency surcharge, which will double next year for those paying a 0.6 percent solvency surcharge this year, are added on top of the base rate.

The state has been borrowing from the federal government to make unemployment insurance payments to Colorado’s jobless for 10 months. Those loans are interest-free for now under a provision of the American Recovery and Reinvestment Act, but the federal government may begin charging interest of 4 to 5 percent beginning this January, according to Don Mares, executive director of the Colorado Department of Labor and Employment.

The state could have another interest-free year if “an aggressive effort” to make that happen passes through Congress before the end of the year, Mares said.

Mares said it could take until 2014 for the state’s unemployment fund to return to solvency if the method for paying into the fund remains unchanged, a timeline shared with many other states and similar to the amount of time the fund was insolvent in the 1980s.

Mares and a group of claimant advocates and business leaders has been meeting for two months to discuss how that method could change in a way that lessens the impact on businesses.

“It’s a work in progress,” Mares said. “Since the whole funding scheme of unemployment hasn’t been looked at for more than 20 years, everything is on the table.”

When state extended unemployment benefits end Dec. 4, it will take some pressure off the state’s unemployment fund, Mesa County Workforce Center Director Sue Tuffin said. But the state’s seasonally adjusted unemployment rate hasn’t moved below 8 percent since March, she said, and Mesa County’s unemployment hasn’t been below 9 percent since November last year.

Tuffin said the premium increase could act as a Catch 22. An employer who lays off an employee before 2011 would have to pay a premium on fewer employees once the premium increases, she said, but the company would also have to pay for unemployment premiums for other employees, plus pay for items such as a severance package for anyone laid off.

Tuffin said she hasn’t heard any specific complaints from employers, but few have given the impression they’re excited about the increase.